Rbs Case Essay

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The report blames both RBS management and FSA supervision for not seeing the problems. Which party is most to blame? Please explain. The report does admit that the FSA supervisions and regulatory framework was not sufficient to prevent the RBS failure and the FSA in part is to be blamed for, but suggests that overall, the failure is largely due to the poor decisions of the RBS management. However, we believe that in fact, the lack of FSA supervision was more to blame for the failure of the RBS. Despite the poor decisions of the RBS management leading to a larger failure than other banks, the RBS in most part was within the regulations. Since the failure of banks, unlike other business, concern the public as a whole, the supervisions should have been stricter and prevented such poor decisions. “The FSA’s overall pre-crisis supervisory approach was inadequate, with overly reactive approach and insufficient data available to assess prudential risk fully.” According to the report, the FSA supervision team failed to consider prudential matters in large part, and when it did, it only focused on the capital requirements and resources and did not routinely consider balance sheet leverage. The team failed to raise concerns about the size, leverage, or composition of RBS’s balance sheet, which would have signaled the concerns of RBS taking more and more leverage prior to the crisis. The failure of the supervision team to address this allowed for the RBS to operate on a high risk. Also, the FSA failed to collect sufficient data to fully analyze the RBS. The report mentions that this may have hampered the FSA’s supervision of the RBS but could not have been a factor in firm’s failure. But, this seems like an excuse since the whole point of the supervision is to identify the factors that could potentially cause failure, and advise the banks to take measures to prevent it. Of

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